The use of POS terminals for validating credit card and bank debit card payments in retail establishments is row widespread. In the present system architecture, there are two principle ways of connecting to the financial transaction processing host computer in order to communicate the necessary data packet messages to effect electronic payment, either by credit card, debit card or electronic funds transfer (EFT), as well as process other standardized administrative functions. The most common way in which a POS terminal communicates with the financial transaction processing host computer is to use an ordinary telephone line and to dial the telephone number of a bank of modems which will answer the POS terminal's call. When the POS terminal and one of the bank of modem have synchronized and established modem communication over the telephone line, the POS terminal sends a request for a financial transaction. Typically, the bank of modems are connected to a packet assembler-disassembler (PAD), which in turn is connected to a packet-switching data network. The financial transaction processing host computer is connected to the PAD. The PAD switches and translates message packets received from the packet-switching network into a suitable format used by the POS terminal. During such financial transaction approval or EFT procedures, establishing modem communication may require 5 seconds while the remaining portion of the financial transaction communication may require an additional 10 to 15 seconds, including the time required for establishing communication over the packet-switching network and for packet conversion (e.g. using the DATAPAC 3101 service) and retransmission over the modem line.
A second way in which the POS terminals are connected to the financial transaction processing host is to provide permanent (i.e. connected for at least several hours at a time) connections between the POS terminals and a terminal node device (i.e. a PAD) in communication with the packet-switching network to which the financial transaction processing host is also connected. In this system (e.g. the DATAPAC 3201), no dial-up is needed, and the node PAD polls the POS terminal for data. If a financial transaction authorization is required by the POS terminals, it will respond to the poll by providing a financial transaction request data packet. The PAD assigns an individual circuit number on the packet network to the individual POS terminal or group of networked POS terminal and sends the financial transaction request data in the appropriate packet format over the packet network to the financial transaction processing host. The end-to-end communication is managed by the PAD and the total time to complete authorization for a financial transaction varies between 6 and 12 seconds. The obvious disadvantage with such an arrangement for connecting the POS terminal to the financial transaction processing host is the cost of providing the permanent connection between the POS terminal and the PAD.
Wireless connection between a POS terminal and a financial transaction processing host is disclosed in U.S. Pat. No. 5,544,763. In this Patent, the POS terminal has a choice between dialing out on a regular telephone line or establishing modem communication with a wireless transmitter receiver device so that the financial transaction request data can be communicated to the wireless device for subsequent transmission through a wireless network to reach the financial transaction processing host.
Use of the wireless medium for such data communications has the advantage that physical installation of the data line or telephone line is not required. However, wireless data transmission for POS terminals should be kept to a minimum to use efficiently the limited bandwidth capacity of the wireless system, and it is also important that the total transaction processing time by wireless be approximately the same as or less than the time required for a transaction request to be processed using land lines.